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Greek govt ‘may resign’ if it loses referendum – European chiefs warn as post-vote situation looks unclear

greeceATHENS: Greece’s radical left government said yesterday it may resign if it fails to win a referendum that could decide the country’s financial future. Greek Finance Minister Yanis Varoufakis said the government “may very well” quit if the public went against it in Sunday’s plebiscite and voted for more austerity in return for international bailout funds. “We are on a war footing” to ensure the rushed referendum happens on time, Varoufakis added in the radio interview.

The world’s financial markets and Greece’s creditors-the European Commission, European Central Bank (ECB) and International Monetary Fund (IMF) are stepping back after days of dizzying drama to watch the outcome. But European chiefs warned the situation was deteriorating and what could emerge after the vote remained unclear. “The situation is only getting worse, due to the Greek government’s behavior,” said Jeroen Dijsselbloem, Dutch finance minister and head of the Eurogroup of euro-zone finance ministers. “In case of a ‘No’, Greece’s situation will become exceptionally difficult,” he told Dutch lawmakers. Such a result would plunge Greece and the euro-zone “into the unknown,” French President Francois Hollande said on an African visit. Ordinary Greeks are divided over which way to vote and even what the referendum is about.

Would a ‘No’ sought by the government prevent yet more grinding austerity? Or, as EU leaders warn, would it send the country crashing out of the euro?

The Greek government led by Prime Minister Alexis Tsipras believes rejecting the bailout conditions would strengthen its hand in negotiations with creditors. Orange posters urging a ‘No’ vote line Athens streets, the word ‘OXI’ (no in Greek) stamped in large black letters. But support for the ‘No’ camp has sharply slid this week as Greeks struggled under capital controls reducing ATM withdrawals to 60 euros ($67) a day.

The government’s failure Tuesday to make a 1.5-billion-euro loan repayment to the IMF has also focused minds. Athens is now in danger of failing in arrears to the ECB if it also fails to pay 3.5 billion euros on July 20. “I was going to vote ‘No’ because I think the Greek people are being treated with contempt. But Tsipras has made the situation so much worse, it’s his fault the banks are closed,” said shop assistant Suzanna Alizoti.

Tsipras’s call for a ‘No’ has split the ruling coalition, with members of partner party Independent Greeks rebelling. One of its lawmakers, Constantin Damavolitis, was expelled from the coalition benches for calling for a ‘Yes’ vote. “The day after the referendum, we will be united,” Tsipras promised in a quick briefing to journalists after meeting Independent Greeks party chief Panos Kammenos, who is defense minister.

But Varoufakis said in his interview with Australian public radio network ABC that a ‘Yes’ result could see the government handing over to a caretaker administration. “Yes, we may very well do that. But we will do this in the spirit of cooperation with whoever takes over from us,” he said. In any case, he told Bloomberg TV in a separate interview, he “will not” continue to serve as finance minister in that event. “We really desperately want to stay in the euro even if we are critical of the institutional framework of the euro,” Varoufakis said.

The prospect of a new Greek government would bolster the country’s EU partners who say they are exasperated with Tsipras’s behavior. European Parliament chief Martin Schulz, told the German newspaper Passauer Neue Presse that Tsipras’s changing tack so often “is really tiring and a lot of people have had enough.” So far, the Greek crisis has had relatively little impact on the markets, suggesting contagion from a possible Greek departure from the eurozone- a “Grexit”-will be contained. “Markets seem to be of the opinion that post-referendum, some agreement will be reached,” Con Williams, an agricultural economist at ANZ Bank New Zealand, wrote in a client note, according to Bloomberg News.

No quick solution
Analysts, including Carsten Brzeski, chief economist at ING-DiBa bank, said the eurozone would likely not let Greece fall even in the event of a ‘No’ vote. “The inconvenient truth on the Greek referendum is that neither a ‘Yes’ nor a ‘No’ vote will quickly lead to a solution,” he wrote.—AFP

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This article was published on 02/07/2015